Foreword
The financial services sector is one of the most important—though sometimes controversial—sectors covered by international trade agreements. It can influence macroeconomic conditions, given its close relationship with monetary and exchange rate policies. Moreover, at a microeconomic level, it provides a link between creditors and borrowers and serves as a vehicle for allocating resources. Financial sector activities may also involve sensitive policies such as social security (pension funds management), health (insurance), and personal savings. This book deals with financial liberalization issues in the context of trade negotiations. The liberalization of trade and investment in financial services is only a subset of the broader financial liberalization agenda. The purpose of trade and investment liberalization is to increase financial market access and remove discriminatory and other access-impeding barriers to foreign competition. By contrast, the main purpose of financial liberalization is to remove distortions in domestic financial systems that impede competition and the allocation of capital to its most productive and profitable uses. In turn, financial liberalization can be divided into domestic financial reform and capital account opening, and there is a rich literature on its appropriate speed and sequencing.
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